The nominal rate of return is the rate of return demanded to cover investment risk.

Question

Quizplus · Accepted Answer

The nominal rate of return is simply the rate of return without taking into account inflation or other factors affecting the return. It does not specifically reflect the level of investment risk. The rate of return demanded to cover investment risk is known as the risk premium, which is added to the nominal rate of return to arrive at the actual or real rate of return.

The Nominal Rate of Return Is the Rate of Return